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BCE price target lowered at Scotia, CIBC

There’s not much money to be made on BCE stock (BCE Stock Quote, Chart, News, Analysts, Financials TSX:BCE)

That’s the opinion of Scotia Capital analyst Maher Yaghi. According to the Globe and Mail, the analyst lowered his price target from $62.50 to $57.25 on Tuesday, while maintaining his “Sector Perform’ rating on the stock.

In a research update to clients, Yaghi explained the reasoning behind his actions.

“We expect BCE’s 3Q results to show a slowing trend in revenue growth however, and unlike recent quarters, margins are finally expected to grow y/y lending a hand to improved EBITDA and FCF generation,” the analyst argued. “Recall that in the first six months of the year the company generated only $1.1-billion in FCF vs a yearly guidance of $3.1-billion to $3.4-billion. While we still expect the company to hit the low end of its FCF guidance, all eyes will be focused on this important metric. We expect wireline revenues to show a slight decline year-over-year owning to weakness in enterprise and equipment sales. Wireless on the other hand should continue to enjoy healthy growth supported by strong subscriber growth while we expect ARPU to be flat year-over-year.”

The move at Scotia mirrored actions at CIBC World Markets. On October 20, analyst Stephanie Price cut her price target from $68.00 to $62.00, while also rating the stock as “Neutral”.

“We believe that the market has stabilized somewhat, with back-to-school less aggressive than feared and pricing up quarter-over-quarter in both wireless and wireline,” Price explained. “We expect Q3 to reflect solid organic wireless subscriber growth (approximately 5 per cent year-over-year), but slower ARPU [average revenue per user] growth (down 0.4 per cent year-over-year, excluding the Q3/22 outage credit) as telecom providers focus on subscriber growth in a more competitive environment. We expect average Q3 organic EBITDA growth of 4 per cent and expect free cash flow growth and the sustainability of dividend growth models to be key topics in the quarter.”

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